Bangladesh political crisis: Indian exporters stare at disruption in goods flow, brace for payment delays | Business News
Bangladesh political crisis: Indian exporters stare at disruption in goods flow, brace for payment delays | Business News
The political turmoil in Bangladesh that deepened on Monday with Sheikh Hasina resigning as the country’s prime minister and flying out has raised concerns among Indian exporters, who see the ongoing political turmoil potentially leading to disruption in the flow of goods at the India-Bangladesh border and payment delays to Indian traders. There is, however, hope among traders that the situation may not take too long to normalise.
Monday’s developments in Bangladesh came at a time when the country is grappling with an economic crisis. High inflation has eroded Dhaka’s US dollar reserves, limiting the country’s ability to import critical goods such as agricultural items, iron and steel, electricity, and plastics from India.
While New Delhi’s imports from Dhaka were stable over the past two years, Dhaka’s imports tumbled by 31.5 per cent to $11.1 billion during 2023-24 (FY24), commerce and industry ministry data showed. In contrast, India’s imports from Bangladesh slipped by just 5.3 per cent to $1.8 billion in FY24 compared to FY22.
Even during the current financial year, economic activity has been slowing in Bangladesh as its imports of petroleum products from India slipped 8 per cent in June compared to May. Similarly, imports of spices fell 42 per cent, rice by 54 per cent, man-made yarn by 38 per cent, and coal and mineral imports by 13 per cent.
Think tank Global Trade Research Initiative (GTRI) said that as Bangladesh experiences political turmoil, it is essential for all political factions to protect garment and other factories and keep supply lines open across the border to sustain trade and economic activity. Bangladesh chiefly relies on garment exports to earn foreign exchange.
“Bangladesh’s exports to India are concentrated in a few categories, with textiles, garments, and made-ups making up 56 per cent of their exports. These items benefit from zero tariffs under the South Asian Free Trade Area (SAFTA) agreement, extended by India,” GTRI said.
GTRI founder Ajay Srivastava stated that India-Bangladesh trade is witnessing an increasing imbalance in favour of India. The persistent trade imbalance can be attributed to the highly diversified nature of India’s exports and Bangladesh’s exports being concentrated in a few sectors.
“India’s exports to Bangladesh are highly diversified, covering sectors such as agriculture, textiles, machinery, electronics, auto parts, iron and steel, electricity, and plastics. Notably, most of these exports to Bangladesh are subject to full tariffs and fall outside the SAFTA agreement,” he said.
“We were facing some disruptions due to the issues in Bangladesh, but we are expecting that the situation will be restored soon and trade will not face any challenges,” Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said.
“While the crisis in Bangladesh poses several risks to India’s trade, proactive measures and regional cooperation can help mitigate these impacts and ensure continued economic stability and growth. The need of the hour is to have a balanced approach, keeping geopolitical and economic considerations in mind,” West Bengal-based exporter and Managing Director of PATTON Sanjay Budhia.
FIEO Regional Chairman (Eastern Region) Yogesh Gupta said the development would impact bilateral trade. “Such incidents hurt the movement of goods at borders,” Gupta said.
PSY Ltd owner Pravin Saraf said the crisis in Bangladesh would have long-term implications. “We were already facing payment delay issues in that country because of the forex shortage there, and now this development would further hurt bilateral trade. We do not know when the situation will be normalised,” Saraf said.
